The economy requires a certain amount of available cash to function. Cash is the dominant means of payment within the euro area, as the clear majority of our daily payments are made using banknotes or coins. Cash is also essential for the inclusion of socially vulnerable citizens, such as the elderly or lower-income groups.
But cash offers other important functions and benefits:
It ensures your freedom and autonomy. Banknotes and coins are the only form of money that people can keep without involving a third party. You don’t need access to equipment, the internet or electricity to pay with cash, meaning it can be used when the power is down or if you lose your card.
It’s legal tender. Creditors, such as shops and restaurants, cannot refuse cash, unless both they and the customer have agreed on another means of payment in advance. For more information see the European Commission recommendation of 22 March 2010 (2010/191/EU).
It ensures your privacy. Cash transactions respect our fundamental right to have our privacy, data and identity protected in financial matters.
It’s inclusive. Cash provides payment and savings options for people with limited or no access to digital money, making it crucial for the inclusion of socially vulnerable citizens such as the elderly or lower-income groups.
It helps you keep track of your expenses. Cash allows you to keep closer control of your spending, for example by preventing you from overspending.
It’s fast. Banknotes and coins settle a payment instantly.
It’s secure. Cash has proven to be secure in terms of cybercrime, fraud and counterfeiting. And, as it’s central bank money, it doesn’t entail financial risks for either the payer or the payee.
It’s a store of value. Cash is more than just a payment instrument. It allows people to hold money for saving purposes without default risk. It is useful for small person-to-person gifts and payments. For example, parents can entrust small amounts of cash to their children for small purchases, or a person can give a friend or acquaintance cash to purchase something on their behalf. Cash also contributes to the financial literacy of children.
Cash is legal tender that can be used to exchange goods, debt, or services. The term "cash" can sometimes also include the value of assets that can be converted into cash immediately. Cash has been used for as long as goods and services have been traded.
Cash Payments in Unbanked and Underbanked Communities
Cash is an important asset for underbanked and unbanked people. Underbanked and unbanked people are those who lack access to traditional banking services, such as checking and savings accounts, and instead rely on cash for their financial management.
To summarize, money has taken many forms through the ages, but money consistently has three functions: store of value, unit of account, and medium of exchange.
Many consumers carry cash, in case other payment instruments are not accepted or out of service. Cash does not crash. It is not dependent on electricity or the internet. Cash plays a key contingency role in disaster recovery and crises situations.
Cash is the most liquid type of asset and can be used to easily purchase other assets. Liquidity is the ease with which an asset can be converted into cash. Cash is the universal measuring stick of liquidity. It's the easiest form of value that is used to purchase other products, services or assets.
Some people still prefer to use cash, perhaps because they like the tactile nature of physical currency or because it provides confidentiality in transactions. But digital payments, made with the swipe of a card or a few taps on a cellphone, are fast becoming the norm.
Cash flow is important because it enables you to meet your existing financial obligations as well as plan for the future. Yet, cash flow is a common challenge among small businesses.
Money is a medium of exchange with a recognized value that was adopted to make it easier for people to trade products and services with each other. The history of money crisscrosses the world as various cultures recognized the need to simplify trade by introducing a single, portable token of value into the process.
When you pay with the cash you've budgeted for purchases, it's easier to track exactly how you're spending your money. It's also an eye-opener and keeps you in reality as to how much cash is going out vs. coming in from week to week or month to month.
Introduction: My name is Saturnina Altenwerth DVM, I am a witty, perfect, combative, beautiful, determined, fancy, determined person who loves writing and wants to share my knowledge and understanding with you.
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